Amazon (AMZN -1.28%) has delivered life-changing returns over the past 25 years. The company now stands as one of the largest corporations in the world with a market cap of $2.3 trillion. That might lead some people to think there is little upside left for the stock. But that's not the case. Here's one reason why.
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Multiple growth paths
Amazon is the leader in several industries. It boasts a dominant share of the U.S. e-commerce and the global cloud computing markets. And the best part is, both of these spaces are still underpenetrated. Consider e-commerce. As of the second quarter, online sales made up just 16.3% of total retail sales in the U.S.
As digital sales grab a larger share of total transactions, well-established leaders in the field that also benefit from strong economic moats will benefit. That describes Amazon to a T. The company's strong network effects make its platform one of the most attractive for online merchants.
Then there is the company's work in cloud computing. CEO Andy Jassy has said that 85% of IT spending still occurs on the company's own premises. So, cloud computing has captured about 15% of the market, despite its significant advantages such as reduced IT-related costs and customized on-demand services, among many others. This gap between real-world value and market reactions should also be a massive long-term tailwind for Amazon.
Keep calm and stay the course
Amazon has not performed well this year due to increased competition in cloud computing. However, being the leader in two industries with significant growth potential makes the stock attractive for long-term investors. So, despite some headwinds this year, it's worth sticking with the tech leader.
